Boeing To Increase 737 Production Rate

Boeing will move ahead with plans to increase the production rate on the 737 program from 31.5 to 34 airplanes a month in early 2012, the company announced this week. Boeing also said it continues to study the possibility of further rate increases, given strong customer demand for the single-aisle airliners.

While Boeing for months has considered the possibility of a rate hike, one concern centered on whether or not its suppliers could support it. Evidently, the suppliers have convinced the OEM they can.

“The global economy continues to recover this year and we believe that airlines will return to profitability in 2011,” said Randy Tinseth, Boeing Commercial Airplanes' vice president of marketing. “We believe that there will be increased demand for airplanes-especially in the market served by the Next Generation 737-in 2012 and beyond.”

The company holds unfilled orders for more than 2,000 of the single-aisle workhorses. At 34 airplanes a month, the new rate accounts for some five years of production.

The possibility of a 737 rate hike surfaced last month during a conference call to discuss the company's first-quarter earnings, when Boeing CEO Jim McNerney expressed more optimism about the direction the market for commercial airliners in general appears to be headed, following the company's decision earlier this spring to accelerate the timing of production-rate increases for both the 777 and 747. McNerney said that while some customers continue to defer or cancel orders, Boeing has seen growing demand from other customers for the resulting delivery slots through both acceleration of planned deliveries and new orders. “The backlog of deferral requests continues to decrease,” said McNerney. “The improving market conditions and the disciplined approach we have taken in managing production rates are paying off.”

Boeing said it did not expect the rate decision to affect its 2010 financial results.